5 benefits of contactless smart cards over magnetics
By Floyd Diaz
For the purposes of fare payment in public transit, contactless smartcards are a clearly superior technology to magnetic stripe cards.
As far back as 2008, the U.S. Federal Transit Administration (FTA), via the Transit Cooperative Research Program, had identified the advantages of contactless systems over all other forms of payment, with smart cards out-performing magnetics in terms of reliability, convenience, security, speed of use, fraud risk management and lowering operating costs.
Don’t let the sluggish adoption of smart card technologies in North America fool you. That reticence is based more on an attempt to leverage legacy investments than any objective analysis of the merits of contactless systems. Contactless smart cards will become the standard because they are simply a better option for passengers and agencies alike – especially as transit agencies adopt account-based payment systems.
Here are five clear benefits of contactless smart cards over magnetics in a modern transit agency environment.
1. Smart cards are more secure.
Compared to magnetics, smart cards offer more storage and secure reading and writing of data thanks to a number of encryption algorithms and electronic keys. In transit, there are numerous examples of fraud with magnetic cards based on the poor security of the technology. Contactless smart card technology has been deployed at some of the largest transit agencies internationally and in the U.S. with virtually no cases of fraud based on the technology.
There are also inherent behavioral safeguards to contactless systems, as the Federal Reserve Bank of Boston pointed out in an Emerging Payment Industry Briefing, “Active participation of the cardholder is required to perform a transaction. The payment device never leaves the consumer’s hand; and the distance factor of 4 inches between the reader and the RFID chip makes unauthorized scanning for customer data more difficult.”
Contactless smart cards, which feature on-board microprocessors, are difficult to hack, replicate or counterfeit. By comparison, replicating a magnetic stripe card is easy and inexpensive. So, an investment in a contactless smart card system is also an investment in fraud prevention that will yield immediately measurable ROI.
2. Smart cards are more reliable and reduce maintenance costs.
Those preoccupied with the expense of transitioning from magnetics should consider the long term. The maintenance savings alone of eliminating magnetic stripe tickets will more than offset the cost of switching to contactless smart cards.
For one, smart cards are more reliable and durable with a failure rate of one in 25,000 transactions compared to one in 5,000 for magnetic stripe cards, according to IBM. Secondly, contactless validators have no mechanical parts, thereby reducing maintenance costs for both parts and labor. Finally, contactless smart cards are sturdy and waterproof, requiring fewer replacements than magnetic stripe cards that are easily damaged by magnetic fields, moisture or normal wear and tear.
3. Smart cards are faster and easier to use.
Smart cards can perform complicated transactions in very little time, automatically allocating charges for each stage or mode of travel. In conjunction with the ability to recharge via web or mobile, this improves passenger experience and provides ease of use.
As to speed: A typical contactless smart card transaction takes about 300 milliseconds – there’s no need to fumble through a wallet or purse, feed tickets into machines, or navigate a turnstile. Improving experience and getting more passengers boarded faster means increased operational efficiencies, greater on-time bus performance and lower total cost of provisioning the service.
4. Smart cards lower operating costs and reduce losses from fare evasion.
Yes, deploying a contactless smart card system is an investment, but it’s a good investment. As noted above, reduced expense in maintenance costs more than make up for the upfront expense. And, although producing magnetic stripe cards is less expensive, contactless smart cards are still less costly overall because of the lower equipment costs and usable life of the smart card.
5. Smart cards have great BI benefits.
By creating a repository for contactless smart card data and linking it to other databases and systems across the transit enterprise, the agency creates a powerful business intelligence (BI) engine for route planning, in particular.
There are also benefits to the enterprise in correlating smart card data to solutions for workforce management, KPIs in operations and enterprise asset management, and for strategic planning purposes.
This is the direction the industry is going – connecting data from smart payments systems and all across the enterprise to improve every facet of experience and operational performance.
Floyd Diaz is director of Automatic Fare Collection (AFC) at Trapeze Group, where he is responsible for developing long term strategic initiatives that will facilitate Trapeze’s market growth in the AFC domain. Visit www.trapezegroup.com.